Buying a home is the biggest financial decision one can ever take. It bestows a sense of identity, achievement, and peace. After buying your dream home, it remains your sacrosanct forever. However, not everyone can afford to buy a house from their savings. Besides, it is not wise to dip into your savings to buy a home. It can put a great burden on your finances. 

 

In such cases, it is advisable to apply for a home loan to manage your finances. The loan amount depends on the value of the property in the market. Most lenders offer up to 80% of the property’s value as a loan. Compared to unsecured loans, home loan interest rates are lower since you have a property put as collateral. However, the interest rate depends on factors, such as age, income, credit score, etc.  

Benefits of getting a home loan

A home loan comes with a host of benefits that you can avail yourself of, such as: 

  • A home loan can be used for both the purchase and construction of a house. 
  • The home loan amount can be as high as Rs. 50,00,000/-, depending on the lender and the value of the property.  
  • The home loan interest rates are affordable to suit a variety of needs and income groups. 
  • The loan tenure can go up to 30 years, allowing you to repay based on your flexibility. 
  • It comes with tax benefits of up to 150,000/- under section 80C of the Income Tax Act.
  • There are zero prepayment charges associated with a home loan. 
  • In the case of a higher home loan interest rate, you can transfer the balance amount to another lender to save a considerable amount on home loan balance transfer. 

Things to consider before getting a home loan

If you are applying for a home loan for the first time, it is crucial to conduct thorough research on the eligibility criteria, documentation, prepayment charges, processing fees, etc. It enables you to make an informed decision and obtain a loan that best serves your needs and preferences. 

Here are the top 4 things to consider before applying for a home loan: 

Know the eligibility Criteria

The eligibility criteria to apply for a home loan vary across different lenders in the market. Before submitting your application to get funds to buy your dream house, you will need to check the lender’s criteria.

  • The applicant must be an Indian citizen residing in one of the cities in India. 
  • The minimum age requirement to apply for a home loan is 21 years. 
  • The minimum age at the end of the loan tenure is 65 years. 
  • The applicant must either be a salaried or self-employed individual. 
  • The applicant must have an active bank account.

Choose the right type of home loan

There are two types of home loans available – floating and fixed-rate loans. The floating rate is linked to the lender’s benchmark rate.  It means that any changes in the benchmark rate will reflect on the interest rate. Whereas, a fixed-rate loan’s interest rate remains the same through the loan tenure. If you are choosing a longer loan tenure, it is better to apply for a floating-rate loan, as the interest rate is subject to reduction due to the benchmark rate.   

Get a pre-approved loan

The benefit of getting your home loan is that it enables you to decide how much you need as a loan. Besides that, it helps in finding your dream home. This way, you can negotiate on the price and close the deal faster. So, before applying for a home loan, check with your lender about the properties approved by them. If you happen to find your home, you do not have to go through the hassle of lengthy documentation. 

Know the documents required

The documents required to apply for a home loan can be divided into three categories: 

  • KYC Documents: It contains identification and address proofs, such as Aadhaar Card, PAN Card, Voters ID Card, and Ration Card. 
  • Income Documents: It includes salary slips, income tax returns, and the computation of income for the last three years. 
  • Property Documents: It includes the agreement to sell the property and the title deeds.  

In short 

Owning your desired house brings with it a fulfilling experience in life, and getting a home loan is the best way to fulfill your dreams. It enables you to secure up to 80% of the property’s value as a loan. Affordable interest rates and flexible loan tenure make repayments easy and convenient. 

However, before applying for a home loan, make sure you meet the lender’s requirements. You can use a home loan calculator to calculate how much you can afford to repay from your monthly budget.